Wednesday, December 22, 2010

Ind. Decisions - Opinion posted late yesterday by Tax Court

Come now the parties on the Indiana Department of State Revenue's (Department) motion to dismiss. The Court, having held a hearing and being duly advised in the premises, now DENIES the Department's motion.

This case involves an investigation begun by the IDOR and the Attorney General of "Virginia and Kristin Garwood' business activities to determine whether they were conducting sales of puppies and not remitting the Indiana sales and income tax due on the sales." The question in this case involves the jurisdiction of the Tax Court.

The Department has presented two alternative reasons as to why the Court lacks subject matter jurisdiction over the Garwoods' petition. First, the Department contends that the Indiana Supreme Court case of State ex rel. Indiana Department of Revenue v. Deaton (Deaton II), 755 N.E.2d 568 (Ind. 2001) controls the outcome of this matter. (See Resp't Br. at 7-10.) Alternatively, the Department contends that the Garwoods' failure to exhaust their administrative remedies by filing a claim for refund with the Department has deprived this Court of its ability to address the claims presented in their petition. The Court will address each of these arguments in turn.

The Department maintains that Deaton II stands for the proposition that its jeopardy tax warrants are the final judgments of the Harrison Circuit Court; thus, “„the day for disputing the tax is over, and the matter has progressed to the collection stage.'” (See Resp't Br. at 9 (quoting Deaton II, 755 N.E.2d at 571).) A close reading of that case, however, reveals otherwise. * * *

Here, unlike in Deaton II, the Garwoods have attempted to contest the validity of the jeopardy tax assessments with both the Department and this Court. Admittedly, Indiana Code § 6-8.1-5-3, on its face, provides no opportunity to contest jeopardy tax assessments; nevertheless, the Indiana Supreme Court has pronounced that taxpayers like the Garwoods may challenge jeopardy tax assessments pursuant to Indiana Code § 6-8.1-5-1. Clifft v. Ind. Dep’t of State Revenue, 660 N.E.2d 310, 317-18 (Ind. 1995).8 Accord 45 I.A.C. 15-5-8(c). Deaton II therefore does not control the outcome of this matter; rather, it simply suggests that the jeopardy tax warrants at issue in this case have not attained the status of “judgments.”

The Court now turns to the Department's alternative claim, that the Garwoods' failure to file a claim for refund with the Department now precludes their challenge with this Court. To resolve this issue, the Court must determine whether the Garwoods' appeal to this Court both “arises under the tax laws” of this state and “is an initial appeal of a final determination made by . . . the [Department] with respect to a listed tax (as defined in Indiana Code § 6-8.1-1-1)[.]” A.I.C. § 33-26-3-1. The Court finds that the Garwoods' appeal satisfies both of these requirements. * * *

The Department assessed the Garwoods with liabilities for Indiana's income and sales taxes, both of which are listed taxes under Indiana Code § 6-8.1-1-1. See IND. CODE ANN. § 6-8.1-1-1 (West 2007.) The Garwoods timely protested those assessments with the Department in conformity with Indiana Code §§ 6-8.1-5-1 and 6-8.1-5-3, 45 IAC 15-5-8, and Clifft. The Department subsequently issued a letter, without holding a hearing, advising the Garwoods that the relief they sought was in the Harrison Circuit Court. Therefore, for purposes of this case, the Department's letter constituted a final determination. The Garwoods' action is an original tax appeal; therefore, the Court denies the Department's 12(B)(1) motion to dismiss. * * *

For the above stated reasons, the Department's motion to dismiss is DENIED in its entirety.